Suez Canal Blockage Continues To Impact The Markets
For the third straight day, the Suez Canal is out-of-commission due to blockage. The 120-mile man-made canal is jammed by one of the world’s largest container ships, the Ever Given. As a result, more than 150 vessels are in limbo, waiting for their turn to pass through the canal.
According to the AP, the canal services 12% of the world’s seaborne trade, estimated to be worth $9 billion of goods daily. The current situation is restricting the flow of commodities, with 24 ships carrying crude oil, 15 transporting refined fuels, and 16 stocked with liquified natural gas all awaiting passage. At press time, there is no word on when the Ever Given will be refloated. At press time, nautical experts estimate the process to take several weeks.
The news from the Suez Canal turned out to be a primary crude oil market mover yesterday. WTI and Brent prices gained more than 5% over potential supply concerns. However, today’s trade has been a different story. Fresh European COVID-19 lockdowns have prompted heavy selling, which has driven May WTI futures beneath the $60.00 threshold.
Suez Canal Blockage Can’t Stop WTI Sellers
Wednesday’s session was extremely positive, with prices closing above $61.00. Now, the May WTI futures contract is trading in the neighborhood of $58.00.
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Bottom Line: The weekly chart above is a look at May WTI futures as of yesterday’s close. Since then, we’ve seen a significant $3.00+ retracement. If prices continue to fall, a long position trade may come into play from the 38% Fibonacci retracement ($55.65).
As long as $67.79 remains the yearly high for May WTI, I’ll have buy orders in the queue from $55.79. With an initial stop loss at $52.19, this bullish position trade produces 720 ticks (profit target of $62.99) on a 1:2 risk vs reward ratio.
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